World stock market: Strong yen weighs on Toyota’s earnings

Toyota Motor Co. (symbol TM on New York) has been the world’s largest carmaker since GM lost that position in 2008. The company is one of the world stock market investments we analyze in our Wall Street Stock Forecaster newsletter. In its third fiscal quarter, which ended December 31, 2010, Toyota’s earnings fell 33.7%, to $1.1 billion from $1.7 billion a year earlier. Earnings per ADR dropped 33.9%, to $0.72 from $1.09, on more ADRs outstanding. Toyota’s sales declined 4.3%, to $56.3 billion from $58.3 billion a year earlier. The strength of the yen against the U.S. dollar was the main reason for the decline (a strong yen lowers the value of Toyota’s exported vehicles.) As well, the Japanese government ended incentives for lower-emission cars. The company is still repairing its image problems in the U.S. A number of sticky gas pedals, faulty floor mats and braking glitches led to recalls of more than 12 million vehicles worldwide between late 2009 and February 2010. In January 2011 Toyota recalled another 1.7 million cars, including its top-selling Lexus IS and GS sedans, in the U.S. It suspects that defective fuel pressure sensors and crack-prone fuel lines might cause fuel leaks within the engine compartment. Even so, sales in the U.S. are starting to rebound. That’s partly because the company is offering incentives to restore consumer confidence. In Asia, Africa and South America sales of the company’s vehicles remain strong. Toyota now expects to sell 7.5 million vehicles in fiscal 2011, up from 7.4 million in fiscal 2010. The stock trades at 15.5 times the $2.80 per ADR the company expects to earn in fiscal 2011. You can get our in-depth analysis, including our updated buy/sell/hold advice, on Toyota and other world stock market investments when you subscribe to Wall Street Stock Forecaster. What’s more, you can get one month free when you subscribe today. Click here to learn how.